The Kwacha is the best performing currency in the world today having moved from 14, at the opening of the market in the morning, to 11.4 against the dollar by mid-day.
The measures employed by BOZ will only work in the short term. To find a lasting solution to this volatility, we need to do the following as suggested in my think piece a few days ago:
IN DEPTH MACRO-ECONOMIC STUDY OF THE KEY METRICS AND DRIVERS OF THE ZAMBIAN ECONOMY: THE WAY FORWARD TO THE KWACHA FREEFALL
BY MWAMBA PENI
INTRODUCTION
Zambia is an exciting promising economy in Africa and has attracted significant regional and international investment over the last decade. However, the past decade has also shown to various times how vulnerable the Zambian economy is to the global economic growth trends and has found itself amidst a global decline in commodity prices, emerging market interest and exchange rate price volatility and ever increasing electricity utility shortages due to slow infrastructure investment, thus not being able to keep up with demand from a growing economy.
In the face of turbulences in the global economy compounded by the continuous volatility of the Zambian kwacha, this paper proposes an in depth macro-economic study of the key metrics and drivers of the local economy so that whatever remedial measures we come up with not only takes a holistic approach but also resonates with what is obtaining on the ground.
MACRO-ECONOMIC ENVIRONMENT
Zambia has been an investment destination choice for international and regional corporations over the past decade that are seeking African US dollar return exposure due to the following factors:
• A proven and largely successful democracy for close to two decades now;
• Pro business political landscape;
• Strong international multinational corporation presence;
• English is used as transactional language and the English common law and customary law system making operational management and legal transactions very business friendly;
• Zambia is largely a US Dollarized economy with limited local trade in Kwacha reducing domestic currency risk on investment and return distributions;
• Strong commodity export industry boosting gross domestic product and in return disposable household income;
• Strong retail growth from the informal to the formal sector; and
• Investors and corporates are seeking yields which are found in developing economies and increasing they are more at ease with the risk that are historically been associated with emerging markets.
Consequently, the Zambian GDP has outperformed its Sub-Saharan counterparts for the past 10 years buoyed by a strong commodity cycle. However, this growth is likely to be affected due to changes in mining tax laws, a widening trade deficit and low copper price. Further, global growth slowdown is putting pressure on the economy with the US looking to tightening monetary policy and stagnation in China’s economic growth. Despite all this, Zambia’s projected GDP for 2015 is reported to be around 5 per cent, which is significantly higher than its Southern Africa counterparts excluding Mozambique.
Besides, Zambia’s currency, the Kwacha, remains vulnerable to further depreciation against the dollar as a free-floating currency in a small commodity-dependent economy. Following a significant declare in trade surplus from last year to date, the foreign exchange reserve has continued to decline and that may plunge the current account balance into deficit for the next few years until the situation gets back to normal. Suffice to say, as the major export commodity, Copper has a large influence on the valuation of the Zambian currency. Therefore, a risk to Copper output is the on-going electricity delivery disruptions.
THE PROPOSED WAYFORWARD
The current situation should be a matter of great concern for every citizen of goodwill regardless of political affiliation. To propose remedial measures without undertaking a holistic in depth macro economic analysis of the key metrics and drivers of the economy will not help us address the root causes but mere symptoms. Therefore, my proposal is that a study is undertaken to address the following so as to come up with sustainable solutions that are based on sound research and not assumptions as the case may be:
• Global macro economic environment and its relevance to Zambia;
• The impact of the global macro environment on the commodity markets;
• The monetary and fiscal reality of Zambia from the perspective of international markets;
• The Zambian vulnerability to external global macro economic factors; and
• The translation of economic metrics and market sentiment on the financial markets of Zambia.
Zambian Kwacha Is Worlds Best Performing Currency Today 1/10, Here Is Why.. added by on
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As long as we have Volatile Copper as our only forex commodity we shall from time to time experience such embarrassment. One way is control of foreign currency purchases. Right now even buying a dog from UK using dollars is allowed. 50 years and we are still importing things. KK established industries which could taken ground by now but Penza & Chiluba destroyed them.
With the help of the aspiring presidential candidate, they liquidated all companies without mess
***Fattening a cow at the abattoir***
Being proactive is always ideal. Ant that is basic element in leadership. Crap fast food.
Thank you! and please take it to the next level.
Why take all proposed measures if it is best performing currency? Why worry about external factors if today it has made these gains without corresponding changes externally. Wasn’t the Chinese currency devalued by only 2 percent?
Crap.
Kikiki. Next year it will be 1:3 with no loadshedding
Kikiki am tired my man. This economy thing is an irritant now.
By the I am surprised that nothing has been said about Nigeria s Buhari appointing himself minister of Petroleum Affairs.
It is foolishness bordering on lunacy to expect to change the effects in the economy at the macro level without any activity at the micro. So imwe peni (nafunyako S kulast), rethink your way forward because it spells stagnation.
That’s why I just summarised it with one word. Tired of pseudo – economists trying to show us why economics wasn’t their major.
Sata, Chiluba and Emmanuel Kasonde benefited from the proceeds, this is the more reason why king cobra defended the third term bid by FTJ which saw the upright men and women like Brig Gen Miyanda, Lt Gen Tembo, Sejani, Nawakwi and others to be expelled from MMD under the instruction of Sata as secretary general of the party. Can you dispute!!
That is your101% Correct. Sata was being cunning and foolish in thinking that with all credible people out, FTJ was going to appoint him. Rude Shock! Kamutapula & he woke up with a new party naba Scott. Thus, it was not difficult to take it out on Kabimba.
kakolwe u are right.
All i know is God will see us through. Sata went through this so it is correct that lungu also goes through it. How do we say lungu is great if he cant go through it. All we need is to control our expenditure at house level and be our brother’s keep. it will be over and forgotten .
Yet Govt blows 3.9 Million Kwacha on a New York trip.All spent on a speech, party members and some sangwapo musicians.
INSALA INSALA INSALA MU PF POOR FAMILY MWACHULENI 4 VOTING PF NOW REGREAT VOTE WISELY NXT TIME…………….
In all labour there is profit. But mere talk leads only to poverty. Proverbs 14:23. Let us be proactive and move away from the blame game.
the solutions have been there all along. problem is poor leadership that takes advantage of the illiterate and peaceful voters who unfortunately are in the majority. otherwise how else can one eplain the tolerance of a govt run by cadres? the bible is very clear; where there is no vision people perish.
Economists, are there not any potential forex commodities we can use other than depending on something seemingly out of fashion now?
ALINUWILA you’re wise! Believing that a political messiah will eradicate poverty is an illusion… .
unless!!!!!!!!!!! The kwacha is the worst performing currency in the world.learn to tell the truth.
i think the wind of change has come .pf no more no were in 2016, the hand for all hh is coming wait poor zambians
can hh and upnd chaps give their version of how we can come out from this economic malaise ,let them have their blue print.
The author might have been drunk to vomit this crap. It is daydreaming. Others are saying ichiloto ukuwama.
Which kwacha is performing better?
These are wishful thinking. Far from reality.
The dollar will soon reach K20.
And everything will have prices increased.
an empty tin is too noisy when. therefore let gingle keep on campaigning on their negative coments but sorrows of the needs oneness to solved unlike what zambian oppositions are doing. how do you think i ll know you ve a solution to the current problem. lt u give solutions to buy my vote period
thats why i like engineering coz it deals with specifics that yield results. economics is a bunch of pure lies. no wonder we have economists in their thousands but they fail to tackle basic challenges.
Which branch of engineering specifically you do?
Spannerboyship!
Haha haha That’s not engineering
cadres always do useless things 4 food. kula landilamo fye. who doesnt know that lsk city drainages are not working and u ar taking a group of cadres to USA instead of using that money 4 unblocking the drainages. tel them FDD vva nawakwi VISION leaders we need now.
The first lady tell us more on Nkandu luo naba mundala kwali amalila.FTJ knew the beauty of Women Nkandu luo .Bamudala nabo baisanga its very good no wonder the kwacha has performed .Nkandu luo load shedded the first lady good professor.
Mwamba peni you’re a breeze of fresh air. Thanks